1. In this batch of cases the petitioners have called in question the constitutional validity of Section 2(n) as amended by Act 20 of 1987 of the Factories Act, 1948 (hereinafter referred to as the Act) as violative of Articles 19(1)(g) and 14 of the Constitution. They have also contended that the endorsements issued by the Chief Inspector of Factories and Boilers calling upon the petitioners to file an application for renewal of registration or licence of their respective factories by nominating the director as the 'occupier'.
2. The petitioners are all running factories of various kinds and are seeking either registration or renewal of their factories' licence. When they filed applications in the necessary forms the same having not been acted upon but the petitioners have been asked to file applications signed by the 'director of company who owns the factory.' It is also stated that the authority cannot act upon the Board resolution authorising the general manager to be the 'occupier' of the factory.
3. The contentions raised by the petitioners are as follows : That Section 2(n) of the Act restricts the freedom to carry on business inasmuch as the Companies Act controls the activities to be carried on by a company and the rights and liabilities of the director are controlled of 'occupier' restricting that such responsibility should be entrusted only to a director of a company, the legislature has interfered with the freedom to carry on business and the restriction imposed therein is not reasonable. It is submitted that a director of a company is as much an officer of a company as any other officer and as such there could be no distinction in the matter of nomination of a responsible officer of the company. It is, therefore, submitted that the provision is also violative of Article 14 of the Constitution. It is further submitted that interpretation place by the authorities in not acting upon the application signed by an officer who is duly authorised by resolution of Board of Directors could not have been rejected on unreasonable grounds and by no stretch of imagination could it be said that the petitioners ought to nominate only a director as an 'occupier' and have, in this context, relied upon various decisions of the Supreme Court in The Commissioner of Income Tax v. The Indo-Mercantile Bank Ltd. : [1959]36ITR1(SC) ., Abdul Jabar Butt and another v. The State of Jammu and Kashmir : 1957CriLJ404 , Vishesh Kumar v. Shanti Prasad : [1980]3SCR32 , Dwaraka Prasad v. Dwaraka Das Saraf (AIR) 1957 SC. 1758, Consolidated Coffee Ltd. etc. v. Coffee Board, Bangalore etc. : [1980]3SCR625 , Mohd. Mumtaz v. Smt. Nandini Satpathy and others (AIR) 1987 SC. 865, Employees' State Insurance Corporation, Indore v. Kailashchandra and others (1990-I-LLJ-486) and Suresh Tulsidas Kilachand and others v. Collector of Bombay and others (1984. Lab. IC. 1614)
4. Controverting these contentions, the respondents contended : that the endorsements made by the respondents are fully in conformity with the provisions of the Act, that it was open to legislature to give a definition to promote the intent and objects of the Act and overcome certain decisions wherein it had been held that the 'occupier' of a factory need not necessarily be either a director or an owner of a factory and the legislature has therefore, provided the meaning or definition of the word 'occupier' separately; that to set the matter at rest and to resolve the controversy as to expression 'occupier' of factory, the legislature has defined the meaning of 'occupier' by the amendment to Section 2(n) of the Act, impugned herein. It was also submitted that inasmuch as the amendment carried out the objects of the Act, the same could not be said to be violative of either Article 14 or 19 of the Constitution. It was also submitted that the interpretation placed by the respondents is consistent with the decision of the Allahabad High Court in M/s. Bhatia Metal Containers (P) Ltd. v. State of U. P. (1990-II-LLJ-534), and therefore the meaning attributed by the respondents is plausible and need not be interfered with.
5. In order to appreciate the contentions raised on behalf of the rival parties it is necessary to set out the provisions of the Act as per the original and amended Acts :
'2(n) 'occupier' of a factory means the person who has ultimate control over the affairs of the factory, and where the said affairs are entrusted to a managing agent, such agent shall be deemed to be the occupier of the factory;
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'2(n) 'occupier' of a factory means the person, who has ultimate control over the affairs of the factory, and
Provided that
(i) in the case of a firm or other association of Individuals, any one of the individual partners or members there of shall be deemed to be the occupier.
(ii) in the case of a company, any one of the directors shall be deemed to be occupier.
(iii) in the case of a factory owned controlled by the Central Government or any State Government or any local authority, the person or persons appointed to manage the affairs of the factory by the Central Government, the State Government, or the local authority, as the case may be, shall be deemed to be the occupier.
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(as it stood after amendment by Act 20 of 1987)
Section 100 which was part of the Act as it stood originally was omitted by Act 20 of 1987. Section 100 reads as follows :
'100. Determination of occupier in certain cases - (1) Where the occupier of a factory is a firm or other association of individuals, any one of the individual partners or members thereof may be prosecuted and punished under this Chapter for any offence for which the occupier of the factory is punishable :
Provided that the firm or association may give notice to the Inspector that it has nominated one of its members, residing within India to be the occupier of the factory for the purpose of this Chapter, and such individual shall, so long as he is so resident, be deemed to be the occupier of the factory for the purposes of this Chapter, until further notice cancelling his nomination is received by the Inspector or until he ceases to be a partner or member of the firm or association.
(2) Where the occupier of a factory is a company, any one of the directors thereof may be prosecuted and punished under this Chapter for any offence for which the occupier of the factory is punishable :
Provided that the company may give notice to the Inspector that it has nominated a director, who is resident within India, to be the occupier of the factory for the purposes of this Chapter, and such director shall so long as he is so resident, be deemed to be the occupier of the factory for the purposes of this Chapter, until further notice cancelling his nomination is received by the Inspector or until he ceases to be a director.
Provided further that in the case of a factory belonging to the Central Government or any State Government or any local authority the person or persons appointed to manage the affairs of the factory shall be deemed to be the occupier of that factory for the purposes of this Chapter.
(3) Where the owner of any premises or building referred to in Section 93 is not an individual, the provisions of this section shall apply to such owner as they apply to occupiers of factories who are not individuals.'
6. An analysis of the proviso to Section 2(n) as introduced by the amendment by Act 20 of 1987 will indicate that in the case of a firm or other association of individuals any one of the individual partners or members and in the case of a company any one of the directors and in the case of a factory owned by a public sector undertaking or Union, State or any local authority, the person appointed to manage the affairs of the factory shall be deemed to be the occupier. When interpreting the provisions of Section 100 of the Act which clearly indicated an identical language the Court have interpreted and stated that notwithstanding what is stated in Section 100 it is permissible to nominate any other persons an occupier if the Board of Directors so resolved for it. The ratio of those decisions is that where a company is an occupier of a factory only one of the directors can be prosecuted and punished as the occupier of the factory and the choice and selection of that director rests on the prosecuting agency but when a company has made nomination as to the occupier of the factory the choice of the prosecuting agency disappears and only the nominated person will have to be prosecuted. It is made clear in several decisions of the Supreme Court that it is not necessary that the occupier must be necessarily the owner or the director of the factory and if by a resolution a person is nominated to be the occupier who is in the ultimate control of the affairs that person or officer would be treated as the occupier in terms of the Act. In the absence of the nomination of the occupier the owner is the occupier and therefore where a company does not nominate an occupier the board of directors as representing the owners of the company would be taken as occupier because the ultimate control would vest in them. But in the present provision what is stated is : an occupier of a factory means a person who has ultimate control over the affairs of the factory and the proviso refers to certain categories of persons in respect of whom the Act deems them to be the occupiers. The proviso to be also occupiers main clause but on the other hand clarifies the meaning given to occupier as to those persons described in the proviso to be also occupiers although there may be another person who may be in charge or ultimate control of the affairs of the factory and it is for them to indicate as to who had been put in ultimate control of the affairs of the factory as required under Section 101 of the Act. The word 'deemed' which is used in the proviso has been subject-matter of consideration by several authorities and the leading authorities on the point indicate that the expression 'deemed' is normally used to create a fiction but may also be used to put beyond doubt a meaning which may otherwise be uncertain or to give the statutory language a comprehensive description that it includes what is obvious and what is uncertain and what is in ordinary sense impossible. The purpose and meaning of the deeming provision has been explained in Daypack System Pvt. Ltd. v. Union of India : 1988(36)ELT201(SC) , which follows the earlier decisions in Commissioner of Income-tax, Bombay Presidency v. Bombay Trust Corporation Ltd. 1930 PC 54 at 56, Hira H. Advani etc. v. State of Maharashtra : 1971CriLJ5 , and St. Aubyn (L.M.) and others v. Attorney General 1951 (2) All ER. 473 at 498. The subject-matter of the proviso may have the effect of elaborating the substantive provision in the enactment having regard to the object of amendment. Hence the effect of reading whole of the Section 2(n) is that, not only the person in ultimate control of the factory but also the persons categorised in the proviso are liable to be deemed as occupier subject to other operative provisions of the Act. Hence, an application for registration of a factory or renewal thereof can be signed by an officer of the company authorised in that behalf even though he may not be a director, partner or an individual of an association of persons and he may also be shown to be an occupier in full control of the factory. In that event the persons named in the proviso, though not actually occupiers are 'deemed occupiers' and are accordingly liable depending upon the other provisions of the Act.
7. The decision rendered by the Allahabad High Court in M/s. Bhatia Metal Containers (P) Ltd. v. State of U. P. (supra), does not deal with the relevant questions that have been raised in these cases. It was merely stated or taken for granted that the proviso excludes the meaning given in the main clause without dealing with the meaning to be attributed to a deeming clause. For the following reasons I cannot accept the view expressed by the Allahabad High Court :
Firstly, it has not considered the effect of a proviso on the main provision. Secondly, rule of interpretation is that proviso does not eat away the main provision unless it is indicated therein. There is no such indication in the present case. Further, the proviso being a deeming clause can be understood only in the normal sense of a deeming clause and full effect will have to be given to the same. If understood thus, there could be an officer of the concern who can be an occupier of a factory having been nominated to be in the ultimate control of the affairs of the concern as also the directors of company or a partner of a firm or an individual of an association of persons who could also be deemed to be liable as an occupier. Such an interpretation is not inconsistent with the provisions of the Act. Moreover, this view is consistent with the view of the Supreme Court in SLP No. 4141/79.
8. The contention raised on behalf of the respondents, that in the light of the amendment that has been made a company has got to nominate only one of the directors or partners, or an individual of an association of persons as an occupier, therefore, cannot be accepted. This position becomes clear if the realities are taken into consideration. In the case of a partnership, on many an occasion there can be sleeping partners who merely are so but do not participate in the affairs of the concern. So also, in the case of a company several financial institutions nominate directors who may have contributed their capital or advanced loans for the purpose of running the business of the company. In such cases those directors or partners cannot be held to be responsible in running the factory for they only know matters relating to finance and not those matters dealt with in the Act in question. It cannot be expected that certain professional men who are nominated on the Board for their skill in any specialised field can be taken to be in charge of the factory by reason of the definition. The proviso does not say that the nominated partner of a firm or that the nominated director of a company would be the occupier. The fact that the definition says that in the case of a firm or association of individuals any one of the individual partners or members there of or a director in the case of company shall be deemed to be the occupier, it gives no choice either to the firm or to the company. But the main clause provides that occupier shall be one who has ultimate control of the affairs of the company. This clause read with the operative provisions of the Act makes it clear that the occupier of a factory could be a person nominated by the Board or by the firm notwithstanding the fact that such a partner or director could also be liable and the liability in respect of the operative provisions in respect of such director or partner will have to be established. Therefore, on the interpretation of the provisions of the Act the conclusion is irresistible that the authorities have not applied their mind to the relevant provisions of the Act in the manner discussed by me. In that view of the matter, the endorsements or orders issued by the authorities will have to be quashed. If that is done it is unnecessary to go into the constitutional validity of the provisions of the Act as it is too well settled that such contentions will not be examined only to serve an academic interest but only when it is absolutely necessary to deal with the same.
9. In the result, the petitions stand allowed and the impugned endorsements issued by the Inspector of Factories or any other respondent and proceedings relating thereto in each of the petitioners shall stand quashed. The respondents are directed to once again apply their mind and decide the matter afresh in the light of what has been stated above in the course of this order and in accordance with law. The interim orders granted by this Court shall enure to the benefit of the petitioners until the disposal of such applications by the authorities. Rule made absolute.